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| Mark, in the money always is a premium to out of the money, it has nothing to do with whether or not it is higher or lower than current price because a put is the right to sell and a call is the right to buy, so they are opposite.
Puts are in the money when they are above the current, price, which gives you a right to sell a futures contract above the market.
Calls are the right to buy and are in the money when they are below the market, allowing you buy a contract at a discount to the market.
So a deep in the money Put would be way Above the market, and an out of the money Put is Below the market.
In the money Calls are Below the market price and out of the money Calls are Above the market price.
For Example, this morning with CHO at 3.85 futures price, a CHO 3.40 call (in the money) was .52/ bu. A 4.30 call (out of the money) was .10/bu. A 3.40 put (out of the money) was .0975/bu, and a 4.30 put (in the money) was .547/bu.
It is how deep in or out of the money that drives the value of the option. Just wanted to clarify to make sure that those new to the basics of options understand what is in and out of the money
Edited by illini81 12/9/2009 09:16
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explain to me using put options, please
